A group of companies entered into leasing arrangements to provide cars to their employees, and to pay the employees mileage allowances. The group leased the cars to the employees for an arm’s length rental. Amounts due to the employees as mileage allowances for business travel were set off against rentals they owed to the group under the car leases.
HMRC argued that the cars were taxable under the car benefit provisions (in ITEPA 2003, s 114), and that the group was liable to pay National Insurance contributions (NICs) in respect of the employees’ use of the cars, and also on the mileage allowance payments. The First-tier Tribunal held that no tax and no NICs were due in respect of the cars or the mileage allowances. HMRC appealed.
The Upper Tribunal (UT) considered that the car leases did not transfer any proprietary rights in the cars to the employees. The arrangements were therefore not excluded from the car
